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Distortion in Screening and Spatial Preferences

Author

Listed:
  • Sergey Kokovin

    (National Research University Higher School of Economics)

  • Babu Nahata

    (University of Louisville)

  • Evgeny Zhelobodko

    (National Research University Higher School of Economics)

Abstract

We study a multidimensional screening problem with minimal restrictions on valuations. Our ?-relaxation of the constraints excludes bunching and cycles in the graph of active incentive-compatibility constraints. Therefore, the Lagrange multipliers do exist and enable us in characterizing distortion. In particular, under “spatial” preferences that include both the Hotelling and the Spence-Mirrlees cases, the solution has a simple planar graph. Consequently, the pattern of distortion is centrifugal, i.e., the points of service are biased towards the low-valuation market segments

Suggested Citation

  • Sergey Kokovin & Babu Nahata & Evgeny Zhelobodko, 2014. "Distortion in Screening and Spatial Preferences," HSE Working papers WP BRP 83/EC/2014, National Research University Higher School of Economics.
    • Handle: RePEc:hig:wpaper:83/ec/2014
    as

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    References listed on IDEAS

    as
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    5. Blundell,Richard & Newey,Whitney K. & Persson,Torsten (ed.), 2006. "Advances in Economics and Econometrics," Cambridge Books, Cambridge University Press, number 9780521871525, January.
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    7. Guesnerie, Roger & Seade, Jesus, 1982. "Nonlinear pricing in a finite economy," Journal of Public Economics, Elsevier, vol. 17(2), pages 157-179, March.
    8. Kokovin, S. & Nahata, B. & Zhelobodko, E., 2011. "All Solution Graphs in Multidimensional Screening," Journal of the New Economic Association, New Economic Association, issue 11, pages 10-38.
    9. Kokovin, Sergey & Nahata, Babu & Zhelobodko, Evgeny, 2010. "Multidimensional screening under nonlinear costs: Limits of standard approach," Economics Letters, Elsevier, vol. 107(2), pages 263-265, May.
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    More about this item

    Keywords

    incentive compatibility; multidimensional screening; second-degree price discrimination; non-linear pricing; product line; distortion; envy-graphs;
    All these keywords.

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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